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(Sharecast News) - Shares of Kenmare Resources surged on Tuesday after the Mozambique-focused titanium minerals producer confirmed it has received a non-binding takeover proposal from Abu Dhabi's International Resources Holdings (IRH).
In a very brief statement, the company said: "Discussions with IRH are ongoing and there can be no certainty that a firm offer will be made, or as to the terms of any such offer, should one be made.
"A further statement will be made as and when appropriate."
Under Irish takeover rules, IRH has until 17 November to either announce a firm offer or walk away.
At 0950 BST, the shares were 27% higher at 230p.
Dan Coatsworth, head of markets at AJ Bell, noted that Kenmare has attracted several bids over the years, yet no deal has ever made it over the line. He pointed out that shareholders have either objected to proposals, or the bids were diluted amid factors such as weakener economic conditions or changes to government royalties.
"It seems that Kenmare is the elusive name in the mining sector and continues to slip through the fingers of bidders," he said.
"Fourteen years ago, at the peak of the commodities boom, there was lots of speculation that Rio Tinto and Dow Chemical were both interested in buying Kenmare. Australian miner Iluka pursued the UK-listed miner in 2014 and 2015 with no luck. Last year, Kenmare founder Michael Carvill and private equity group Oryx together tried and failed to take the business private.
"Kenmare operates the Moma mine in Mozambique and produces ilmenite, rutile and zircon. These products are used across multiple areas such paint, sunscreen and anti-perspirants. Moma contains one of the world's largest resources of titanium minerals and at current production rates is expected to run for at least another 100 years. That makes it a highly attractive asset for a rival miner looking to expand operations or to a private equity group looking for long-term cash flows.
"Despite the high-profile status of the Moma mine, Kenmare is only a small company in size, it has substantial debts, and demand for its products is cyclical. That makes for a rocky ride for shareholders. The latest bid looks opportunistic but also potentially credible."
Coatsworth said that IRH - a 'mine to market' investment group with copper assets in Zambia and a variety of trading and technical services - has bold ambitions to be a major player in the mining sector and is backed by $216bn Abu Dhabi conglomerate IHC. "That suggests deep pockets to finally get a deal done on Kenmare," he said.
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